Wells Fargo officials make record $240 million settlement over bogus accounts
It resolves claims that the officials breached their fiduciary duties
|Friday, March 1, 2019|
Published by Compliancex.com
Wells Fargo & Co officials have reached a record $240 million settlement with U.S. shareholders over the creation by bank employees of millions of unauthorized customer accounts.
The settlement disclosed late on Thursday requires insurers for 20 current and former Wells Fargo executives and directors, including Chief Executive Tim Sloan and his predecessor John Stumpf, to pay the $240 million to the bank.
It resolves claims that the officials breached their fiduciary duties by knowing about or consciously disregarding the bogus accounts, and failing to stop their creation.
The officials denied wrongdoing in agreeing to the settlement filed with the federal court in San Francisco, where Wells Fargo is based.
Lawyers for the shareholders called the accord the largest insurer-funded cash settlement in a U.S. shareholder derivative lawsuit, surpassing News Corp’s $139 million accord in 2013 over its handling of a phone hacking scandal in Britain.
The settlement requires a judge’s approval. It follows Wells Fargo’s $480 million settlement last May of a securities fraud lawsuit by shareholders raising similar claims. The shareholders were led by pension plans in Alabama and Colorado.
Wells Fargo spokesman Peter Gilchrist declined to comment on Friday.
Shareholders bring derivative lawsuits on behalf of companies, typically when the defendants are corporate officers or board members, with proceeds going to the companies.
Wells Fargo has been beset since September 2016 by scandals in several business lines over its treatment of customers, often caused by employees under pressure to meet sales quotas.
On Wednesday the bank said it might have to pay up to $2.7 billion more than it had set aside as of Dec. 31 to resolve legal matters, up from $2.2 billion three months earlier.
Wells Fargo said it has improved risk management and clawed back compensation from some officials since the scandals broke.
Sloan nonetheless remains under pressure, and faces calls from Massachusetts Senator Elizabeth Warren, a Democrat running in the 2020 presidential campaign, for his ouster.
The case is In Re Wells Fargo & Co Shareholder Derivative Litigation, U.S. District Court, Northern District of California, No. 16-05541.